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FDA chief hints at changes to drug rebates ahead of Trump speech

The leader of the Food and Drug Administration suggested the legal status of rebates paid by drug companies to insurers and pharmacy benefit managers could get another look to help rein in the costs of prescription drugs.

In a speech on Thursday, Scott Gottlieb said if the federal anti-kickback law that protects such rebates were changed, it could help increase competition and make drugs more affordable.

“One of the dynamics I’ve talked about before that’s driving higher and higher list prices is the system of rebates between payers and manufacturers,” Gottlieb said. “And so what if we took on this system directly, by having the federal government reexamine the current safe harbor for drug rebates?”

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Generally, a pharmaceutical company pays a rebate so a pharmacy benefit manager — the third-party administrators of prescription drug programs — will make its product the only one of its kind on the list approved for reimbursement or so that the co-pay for its product is less than the co-pay of competing products.

Federal law shields these rebates from legal scrutiny. Critics argue the savings from the rebates aren't passed on to consumers. Insurers say they spread the savings from discounts to lower overall premiums.

Drug companies have engaged in a massive lobbying campaign aimed at passing the blame for high drug prices onto insurers and pharmacy benefit managers, while pharmacy benefit managers continue to point the blame at drug companies.

Gottlieb did not address the specifics of Trump’s plan, but he said the effort will be focused on increasing competition.

“I can tell you that the framework … will dismantle many of the provisions that shield parts of the drug industry from more vigorous competition,” Gottlieb said.

One of the changes involves Health and Human Services Secretary Alex Azar “making a series of changes to the pricing mechanisms in [Medicare] Part D.”

Gottlieb didn’t say what those changes were, but part of President Trump’s budget proposal involved shifting drugs from Medicare Part B into Part D, where there is more negotiation over the price.

“Taken together, these changes … [will] put us more firmly on a footing to defend the idea that brisk competition should be the vehicle by which we seek to lower drug costs,” Gottlieb said.

Gottlieb has also been outspoken about trying to stop brand-name drug companies from gaming the system in order to keep generic competition off the market. He said part of Trump’s plan will address this.

“We’re going to be unveiling some new guidance in the next few weeks, as part of the President’s plan, which addresses some aspects of these loopholes that companies exploit,” Gottlieb said.